Five Steps To Researching a Stock Trade Prior to Investing
Once you determine which growth cycle the economy is currently in you can start researching which stocks to buy. It is advisable to have some sort of a system in place that you will use before each trade. Below is an easy 5 step formula to assist get you started.
Five Steps to Investing Online:
1. Discover a suitable stock
This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks in which to trade an excellent general rule to consider is the time of the year. As an example, as I compose this, it is the beginning of spring. It would make sense to consider stocks that generally make runs, (or slide if you are bearish), during this time of year.
2. Fundamental Analysis
Lots of short-term traders might disagree with the need to do ANY Fundamental Analysis; however, knowing the chart patterns from the news and the past concerning the stock is pertinent. An example would be profit season. If you are planning on playing a stock to the upside that has missed its earnings targets the last 3 quarters, care could be in order.
3. Technical Analysis
This is the part where signs come in. Stochastics, the MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all of the rest. The batch of indicators you choose, whether lagging or leading, might depend upon where you get your education.
Keep it simple when first starting out, using too many signs at the start will probably lead to huge losses. Get very comfy using one or two signs initially. Learn their complexities and you’ll be sure to make better trades.
4. Follow your choices
Once you have made a few stock trades you ought to be handling them correctly. If the trade is intended to be a short-term trade watch it intently for your exit signal. If it’s a swing trade, watch for the signs that inform you the trend is moving. If it’s a long term trade keep in mind to set monthly or weekly checkups on the stock.
Make use of this time to keep abreast of the news, determine your price targets, set stop losses, and keep an eye on other stocks that you might want to own as well.
5. The Big Picture
As the saying goes, all ships rise and fall with the tide. Knowing which sectors are warming up will give you a great advantage.
For example, if you are long (anticipating the price to go up) on an oil stock and a lot of the oil sector is increasing then most likely you are on the winning side of the trade. Several trading platforms will provide you access to sector-wide details so that you can get the education you need.